Federal student loans are in forbearance until Sept. 30, 2021, and unless President Joe Biden's administration takes further action, millions of borrowers will need to resume making payments on Oct. 1. But the vast majority of college graduates aren't prepared for federal student loan payments to resume, according to a survey of more than 23,000 student loan borrowers conducted by Student Debt Crisis, an advocacy group.
Senate Democrats have called on Biden to cancel up to $50,000 worth of student loan debt per borrower via executive order, but Biden himself has cast doubt upon such robust student loan forgiveness measures. Just over half of respondents (52%) are optimistic about their student loan situation with President Biden in office, the survey found.
Nine in 10 federal student loan borrowers will not be ready to resume payments on Oct. 1, and about two-thirds (65%) won't be ready until September 2022 or later. If you're among the majority of borrowers who don't know what to do with their student loans, keep reading to learn more about your options to make your resumption of payments easier, like income-driven repayment plans, economic hardship forbearance and student loan refinancing.
Private student loan rates are near historic lows, which means it's a good time to refinance your private student loans if you're looking to save money. Visit Credible to compare rates across multiple lenders and see if refinancing is right for you.
What to do with your student loans before payments resume
No one knows if student loan forgiveness measures will be successful, and with student loan payments set to resume this October, it's time to start thinking about making payments again. Borrowers have a few options to consider in the meantime:
- Enroll in an income-driven repayment plan: Federal student loans offer income-driven repayment, which sets your monthly payment according to your income. You can apply for income-driven repayment on the Department of Education's website.
- Apply for economic hardship forbearance: Borrowers who are experiencing financial hardship can apply for further student loan forbearance. The federal government offers two types of forbearance: economic hardship deferment and unemployment deferment.
- Refinance your private student loans for a lower rate: The moratorium on student loan payments only applies to federal student loans, but many borrowers have private loans, too. Refinancing your private student loans can help you lower your monthly payments or pay off your debt faster.
If you're considering refinancing your private loans, make sure you compare offers from multiple lenders on Credible to ensure you're getting the lowest possible rate for your situation. Doing so will not impact your credit score.
Student loan borrowers relied on the federal forbearance moratorium
Seeing as 90% of student loan borrowers aren't prepared for the student loan forbearance period to end, it's not surprising that many among them were reliant on COVID-19 emergency relief. Three-quarters of survey respondents said the payment pause was critical to their financial wellbeing.
"The pause in payments of my student loans has allowed me to catch up on my car payments, so it was not repossessed," said one respondent from New York. "It allowed me to bring my large balance on medical bills down. It has eased my worries about not having enough money to support my family with the basic needs for life."
Student loan payments are a burdensome debt when you're trying to budget for living expenses. Nearly a third of borrowers surveyed said that more than 25% of their income will go toward student loans if payments resume.
If you have private student loans in addition to your federal student loans, there's never been a better time to refinance. Borrowers who refinanced to a shorter loan term on Credible saved $17,344 over the life of their loans. Find out your private student loan interest rate, and compare rates in the table below to see if refinancing is right for you.
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